Stocks to buy

With President Joe Biden officially announcing his re-election bid recently, investors should start considering the best construction stocks to buy now. Let’s be real: Biden doesn’t have the greatest approval rating. And he’s old – astonishingly old. Nevertheless, he does have a solid chance of winning the White House again. And that bodes well for the blue-collar sector because of Biden and construction industry dynamics.

Obviously, Biden initially ran on the campaign promise to build back better. And he helped make good on that promise via the Bipartisan Infrastructure Deal. With a second term, Biden may bring some predictability to the political order. Further, reports about the construction industry analysis in 2023 point toward the pursuit of growth despite macroeconomic headwinds. There’s a better chance of that happening if Biden wins.

Still, how can anyone be so confident about his reelection? As The Guardian pointed out, the Republicans are internally divided. You have small-government Republicans (remember those guys?), Trump hardliners and the “Fringe” (it’s better I don’t explain). For the Democrats, you only have President Biden and “Dark Brandon.” It’s just a more cogent framework. Here are the top construction companies to invest in.

MLM Martin Marietta Materials $397.66
MAS Masco $53.45
VMC Vulcan Materials $193.57
CAT Caterpillar $215.09
DE Deere $381.09
URI United Rentals $342.05
KELYA Kelly Services $16.24

Martin Marietta Materials (MLM)

Source: Vova Shevchuk / Shutterstock.com

Headquartered in Raleigh, North Carolina, Martin Marietta Materials (NYSE:MLM) is a supplier of aggregates and heavy building materials, with operations spanning 26 states, Canada, and the Caribbean. Notably, Martin Marietta supplies resources for the construction of roads, sidewalks, and foundations. Presently, it features a market capitalization of $24.65 billion. Since the start of the year, MLM gained an impressive 15%, making it one of the best construction stocks to buy now.

On the financials, Martin Marietta benefits from solid operational statistics. For example, its three-year revenue growth rate comes in at 9.3%, above 68.87% of other construction stocks. Also, its EBITDA growth rate during the same period pings at 12.4%, above 64.09% of sector rivals. On the bottom line, the company posts a trailing-year net margin of 14.07%, outflanking 82.64% of its peers. It’s also consistently profitable. Finally, Wall Street analysts peg MLM as a consensus strong buy. Their average price target lands at $418.50, implying almost 8% upside potential.

Masco (MAS)

Source: PX Media / Shutterstock

An American manufacturer of products for the home improvement and new home construction markets, Masco (NYSE:MAS) is a bit of a risk when compared to other top construction companies to invest in. Largely, MAS depends on sentiment for renovation and real estate acquisition. That’s questionable given rising layoffs and interest rates. Nevertheless, for contrarians, MAS could rank among the best construction stocks to buy now.

Indeed, the market carries optimism, with shares bouncing over 11% since the Jan. opener. Operationally, Masco enjoys encouraging stats. For instance, its three-year revenue growth rate comes in at 17.1%, ranked above 84.26% of other construction stocks. Also, its EBITDA growth rate during the same period lands at 13.4%, above 67.44%. On the bottom line, Masco prints an excellent trailing-year net margin of 9.67%, beating out 82.91% of the competition. As with Martin Marietta, Masco benefits from consistent profitability.

Lastly, covering analysts peg MAS as a consensus moderate buy. Their average price target is $57.92, implying nearly 10% upside potential.

Vulcan Materials (VMC)

Source: Epic Cure / Shutterstock

Hailing from Birmingham, Alabama, Vulcan Materials (NYSE:VMC) is the nation’s largest producer of construction aggregates— primarily crushed stone, sand, and gravel — and a major producer of aggregates-based construction materials, including asphalt and ready-mixed concrete, according to its website. Because of the Biden and construction industry relationship, VMC popped up 8% since the beginning of this year.

Investors may look forward to additional gains as VMC ranks among the best construction stocks to buy now. Primarily, Vulcan enjoys strong sales performances. Its three-year revenue growth rate pings at 14%, above 80.44% of its rivals. On the bottom line, Vulcan features an operating margin and net margin of 13.79% and 7.87%, respectively. Both stats rank above at least 65% of sector peers.

To close out, analysts peg VMC as a consensus strong buy. This assessment breaks down as 10 buys, two holds and zero sells. Overall, the experts’ average price target is $209, implying nearly 10% upside potential.

Caterpillar (CAT)

Source: Zurijeta / Shutterstock.com

A world-famous construction equipment manufacturer, Caterpillar (NYSE:CAT) is no stranger to lists targeting the best construction stocks to buy now. However, it’s interesting at this juncture because of the Biden and construction industry dynamics. In the runup to the 2016 presidential election, former President Donald Trump often praised Caterpillar. However, CAT represents a contrarian play, with shares down 12% since the January opener.

To be fair, many of its fiscal stats sit as rather ho-hum: not bad, not great. For example, its three-year revenue growth rate comes in at 5.7%, better than 54% of its peers. That’s nice but nothing earth-shattering. Also, its free cash flow (FCF) growth rate during the aforementioned period is 9.2%, better than 50.43% of sector players. Again, nothing remarkable.

However, Caterpillar offers business predictability. Its operating margin and net margin ping at 15.73% and 11.53%, ranking better than at least 87% of other construction stocks. Currently, analysts peg CAT as a hold. On average, the experts anticipate shares hitting $239.07, implying growth potential of almost 14%.

Deere (DE)

Source: shutterstock.com/CC7

Specializing in the manufacture of agricultural machinery, Deere (NYSE:DE) is a key player in heavy equipment, forestry machinery, diesel engines, drivetrains used in heavy equipment, and lawn care equipment. Given the Democrats’ holistic view of infrastructure, the need to boost food-related supply chains should undergird this special category of the best construction stocks to buy now. Since the start of the year, DE lost 12% of its equity value.

However, such red ink seems rather unreasonable given the broader fiscal picture. Operationally, Deere’s three-year revenue growth rate pings at 11.7%, beating out nearly 72% of its peers. Its EBITDA growth rate during the same period comes in at 18.6%, above 72.46%. On the bottom line, the company’s net margin lands at 14.9%, ranked better than 92% of sector players. Also, it enjoys consistent profitability.

Turning to Wall Street, analysts peg DE as a consensus moderate buy. Their average price target stands at $470.15, implying nearly 26% upside potential.

United Rentals (URI)

Source: Freedom365day / Shutterstock.com

Billed as the world’s largest equipment rental company, United Rentals (NYSE:URI) owns approximately 4,700 classes of equipment. In addition, United offers a combined total of over 1,400 locations covering North America, Europe, Australia, and New Zealand. Should President Biden win reelection, construction demand might soar, boding well for equipment providers.

Enticingly, the market prices URI at a forward multiple of 7.93. As a discount to projected earnings, United ranks better than 82.78% of the competition. Also, URI trades at 4.86 times the operating cash flow. In contrast, the sector median comes in at 10.91 times. Operationally, United posts a three-year revenue growth rate of 10.9%, ranked better than 71.89% of its peers. Also, its book growth rate during the aforementioned period is 25.5%, outpacing nearly 85% of the field.

Looking to the Street, analysts peg URI as a consensus moderate buy. Their average price target hits $421.83, implying over 28% upside potential. Though it’s a higher risk, it makes a solid case for the best construction stocks to buy now.

Kelly Services (KELYA)

Source: Wright Studio/Shutterstock.com

An office staffing company featuring global operations, Kelly Services (NASDAQ:KELYA) might not immediately figure as one of the top construction companies to invest in. However, Kelly provides staffing solutions for myriad industries, including the construction sector. And frankly, building back better doesn’t mean much if companies don’t have anyone to do so.

To be fair, KELYA represents one of the higher-risk stories among construction stocks, with shares down 7% year-to-date. Still, it could attract speculators because of its value proposition. Currently, the market prices shares at a forward multiple of 9.99. As a discount to projected earnings, Kelly ranks better than 72.19% of the competition. Also, KELYA trades at 0.63 times tangible book value. In contrast, the sector median is a lofty 2.14 times.

On the balance sheet, Kelly enjoys a cash-to-debt ratio of 2.18, above 61.56% of its peers. However, it had some troubles regarding negative sales growth and net margin. Nevertheless, an improved construction sector outlook could do wonders for the enterprise. On a final note, analysts peg KELYA as a consensus moderate buy. Their average price target stands at $24, implying over 52% growth potential.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

Articles You May Like

The 3 Most Undervalued Airline Stocks to Buy in July 2024
The 3 Best Retirement Stocks to Buy in July 2024
Discover The ‘Limitless Energy’ Breakthrough Backed By ChatGPT’s Creator
7 Stocks to Dump Before the AI Bubble Bursts
The 3 Most Undervalued Cathie Wood Stocks to Buy in July 2024